With the economy in the doldrums for the length of time it has been, it was only a matter of time before the commercial carpet sector would be affected similarly to what the residential broadloom segment has experienced.

With carpet sales as a whole down anywhere from 20% to 30% in 2008, numbers for the commercial sector are now reflecting this trend, and are down so far this year in similar fashion, while modular tile sales continue to gain market share, offering commercial producers a beacon of hope.

While opinions differ as to when exactly things will turn around, the one certainty among commercial carpet producers is, they are preparing for a longer time until signs of recovery are seen rather than sooner.

Glen Hussman, president and CEO of Tandus, said, “From the information that we are able to gather from public company, supplier and industry reports, the commercial segment appears to be down 25% to 30% year over year. “The commercial market didn’t really start to contract until the second half of 2008,” he explained, “so the first quarter 2009 numbers compared to the first quarter of 2008 are significantly lower, in the range described above.”

According to James Lesslie, president of Beaulieu Commercial, “Our customers have had significant cutbacks and layoffs, therefore commercial specifications are more challenging [now] than this time last year.”

Tim Baucom, Shaw’s vice president of commercial marketing and sales, stated that in 2008, the commercial industry remained flat compared to 2007. “In the first quarter of this year, the industry is down 5% to 10%.” So far, in 2009, “orders are down 15% to 25%,” he explained, “compared to 2008. Shipments are off 5% to 10%. Within that, we are seeing flat to slight growth in the education, healthcare and government markets. Retail, hospitality and corporate markets are experiencing deep reductions.”

Mark Clayton, vice president of J&J Invision, agreed with Baucom, saying the economy “has obviously had an impact on the commercial segment, just as it has the residential segment. Sales began to soften in the third quarter of 2008 and have remained challenging since.

“The first half of 2009 has proved to be more challenging in certain segments,” he added, “but there are other areas where business opportunities seem to be flourishing. For example, corporate and retail have obviously taken a hit over the past several months, but education, government and healthcare remain bright spots.”

Al Kabus, president of The Mohawk Group, said, “We believe commercial is down anywhere from 20% to 25%. When we talk to folks in the industry, that is the consensus that we find.”

Carpet tiles gain

While overall commercial broadloom sales have been down, the sales of modular carpet have continued to gain market share, and are looked at as a positive in an otherwise down cycle.

“It’s more of a segment story,” said Kabus, “with corporate being the largest. The specified market is a $3 billion market, and the corporate segment represents about $1.3 billion to $1.4 billion of that. Of that segment, carpet tile dominates the soft good offerings. And even that market has been hit pretty significantly.

“But while we believe the market is starting to flatten,” he explained, “as far as carpet tile goes, it’s faring better than broadloom, having taken share from it over the last few years. Right now for us in sales, it’s 65% broadloom versus 35% tiles, with tiles growing.”

Lesslie concurred, noting, “The carpet tile business continues to grow, but patterned carpet tile is still dominant.”

Baucom commented, “Tile sales remain stronger than broadloom, and it continues to take share in corporate, education and government end uses. Tile continues taking share from broadloom because of advances in design and sustainability, and it’s seen as a better value.”

Clayton agreed, but added a caveat, “no doubt, over recent years we have seen modular sales growing at a quicker rate than broadloom sales; however, tightened budgets have caused many to take a second look at broadloom as a viable option in order to hold project budgets in line.”

Hussman commented on some of today’s current trends and designs in commercial carpet, noting, there seems to be a trend “toward ‘simple elegance,’ which is consistent with a shift in public opinion away from symbols of excess. Despite an overwhelming emphasis on the economic downturn, the trend toward environmentally conscience purchasing decisions continues to grow.

“All segments are impacted by this downturn,” he added, “some more than others, such as corporate related project activity, but the industry as a whole is adjusting to what is a significant but hopefully temporary contraction in demand.”

Gerard O’Keefe, vice president of broadloom for Nourison, a relatively new player in the commercial carpet arena, said the strongest segment for the company has been hospitality. “Having just returned from our first showing at the Hospitality/Design Expo in Las Vegas, we received some very positive reactions and good leads. Our looms were installed late last year, and we’ve delivered some projects in Asia, and a couple in the U.S. Our handmade factory is right nearby, so we are able to hand color the broadloom that we produce on the loom, which allows us to create some really unique looks.”

Baucom sees the healthcare market as trending upward as baby boomers age. “It’s becoming more competitive as the segment takes design cues from the hospitality industry. Healthcare is using design to promote wellness. Education is trending upward partially because of population trends and funding factors. More schools are being built.”

Clayton believes pricing is key moving forward. “As business becomes more and more challenging, we are seeing project budgets tighten, which ultimately means you must be sure to introduce products that will meet those price points. Manufacturers must look for ways to build better products with fewer raw materials and reduced cost.

“We find that customers really appreciate the flexibility we offer by bringing many of our products to market in both modular and broadloom options,” he explained. “Again, as budgets get squeezed and projects are often ‘value engineered,’ it’s important to offer solutions that don’t compromise the designer, dealer or end user’s original design or performance criteria, and that’s one of the many solutions we provide.

Environmental and social responsibility continue to be at the forefront of everyone’s minds, Clayton added. “Products like our new eKo modular backing are gaining a lot of traction due to the fact that they are closed loop recyclable and they require less raw materials in the manufacturing process.”

Kabus stated, “So far in 2009, the shining spot for us has been the government segment. We believe we are the largest supplier to government, and are up in the segment significantly, about 25% in the first quarter.”

As for the rest of the year, Hussman noted, “We are expecting the market to continue to be tough through 2009 and overall project activity to remain at a relatively low level.”

Baucom stated, demand exists “in the projects that are searching for financing. If financing opportunities can help to relieve this demand, then 2009 could be a decent year. However, this needs to happen soon. We are deep enough into the year from an order standpoint that 2009 will be below 2008 and it’s too late in the year to make up for the lost ground.”

Clayton, who expects the remainder of the year to be challenging, commented, “Although some positive indicators are beginning to appear, and we are hearing hints of good things beginning to happen on the residential side, we all know that the commercial market typically trails the residential market, so we realize the balance of 2009 will present the industry with opportunities.”